Wheat futures rebounded sharply from negative territory after
Ukraine, according to traders, banned exports of the grain, after a rapid pace of exports threatened
to deplete drought-hit supplies.

A clash between traders, which have been accelerating grain
imports for fear of curbs, and a government keen to protect domestic supplies
after a 30% slump in the domestic harvest came to a head on Friday with a ban which
will take effect on November 15, merchants said.

Officials and traders agreed after the poor harvest to limit
wheat shipments in 2012-13, which started in July, to 4.0m tonnes, and overall
grain exports to 19.4m tonnes.

However, while the cap on wheat exports was last week raised
to 5.0m tonnes, that looked incapable of accommodating even the existing pace
of shipments, which merchants have accelerated for fear of trade restrictions.

As of October 8, Ukraine had shipped an estimated 3m tonnes
of wheat so far in 2012-13, with a further 2m tonnes, at least, believed
contracted for future shipment.

Market reaction

The immediate impact was to send Chicago wheat futures for
December, which had posted small losses, to $8.85 ½ a bushel, a gain of 2.0% on
the day, before the contract gave back some of its gains, after Ukraine's farm ministry failed to confirm the curbs.

In Europe, Paris wheat for November added 1.5% to E263.75 a
tonne, while London wheat for November gained 1.0% to £203.35 a tonne.

The apparent ban would represent the latest in a series of restrictions on
grain exports by Ukraine, which imposed quotas after drought hit its 2010
harvest, and last year introduced levies in an effort to raise cash, although
these were withdrawn after stoking widespread opposition.

The country also has a record of informal barriers to
shipments, such as prolonged phytosanitary checks on cargos.

Merchants prepared

Neighbouring Russia in 2010 imposed a full ban, although Ukraine's
move is considered less serious, in part because it is being introduced later
in the season, when notable exports have already been completed, and in part
because Ukraine's merchants, and international markets, have prepared better for
restrictions.

Indeed, consultancy ProFarmer cautioned on Wednesday that "exporters
are trying to accelerate the pace of export shipments of wheat because of the
risk of limits on exports in the future".

After shipping 3m tonnes of wheat, they had already
collected a further 540,000 tonnes for export, the consultancy said.

Exports of barley and corn, of which Ukraine is also a
notable importer, are thought unlikely to suffer a ban on shipments, given
their lesser degree of political sensitivity, and greater relative abundance.

Ukraine, which harvested 15.5m tonnes of wheat this year, consumes some 12m tonnes a year itself.

Implications for US?

Markets have been tracking closely the fate of Black Sea
exports, which are keenly priced but this year drought depleted, to judge the
timing of an anticipated switch to European and US supplies.

Indeed, while the pace of US wheat export sales for 2012-13
is so far well behind the pace needed to meet government projections,
Rabobank separately on Friday forecast that US shipments "will increase strongly
in the October-to-December quarter as importers switch from alternate origins
to North America".

This switch included tenders by Egypt, the top importer, "which
are unlikely to be awarded to the Black Sea region for the remained of 2012-13",
the bank said, in comments written ahead of Ukraine's announcement.

Rabobank estimated US wheat exports this season at 1.20bn
bushels, 50m bushels above official expectations.

Record-tight European supplies

The bank also forecast European Union wheat exports beating
expectations, after a "strong start to the season, with export licences only
200,000 tones behind the 2011-12 pace despite a 6m-tonne decrease in production".

The bloc will end 2012-13 with a stocks-to-use ratio – a key
measure of availability, and therefore price prospects – of 6.1%, down 3.4
points year on year, and "the lowest since records began in 1960".